The Singapore dollar and the Chinese yuan gained among Asian currencies this week on signs the region’s economic recovery was intact even as global financial markets turned volatile.
International investors will add to holdings of Singapore bonds, the only economy in Southeast Asia with a top rating from Standard & Poor’s, Moody’s Investors Service and Fitch Ratings, Macquarie Group Ltd said in a research note on Aug. 6.
Malaysia’s ringgit rebounded from a one-month low after data this week showed industrial production climbed unexpectedly in June.
The yuan had its biggest weekly gain since 2007 after China’s trade surplus widened last month.
“Long-term diversification into non-dollar assets is a given although US Treasuries remain the deepest and most liquid market,” Bank of Singapore currency strategist Sim Moh Siong said. “For China, the FX reserves accumulation is becoming an expensive affair and the only way to accumulate less is to allow for more yuan appreciation.”
The Singapore dollar advanced 0.6 percent to end the week at S$1.2119 against the greenback, according to data compiled by Bloomberg. The yuan rallied 0.8 percent to 6.3895, its biggest weekly gain since December 2007, while the ringgit appreciated 0.4 percent to 3.0020, its third weekly gain in four.
The yuan strengthened beyond 6.40 per US dollar for the first time since 1993. Consumer prices in China rose 6.5 percent last month, the most in three years, while the nation’s trade surplus widened 41 percent to US$31.5 billion, government reports showed this week.
“We still haven’t seen the peak of China’s inflation,” said Sean Callow, a senior currency strategist at Westpac Banking Corp in Sydney. “It’s logical the government is using currency gains to curb inflation. The accelerated appreciation was kicked off by the S&P downgrade and it does indicate China’s pessimistic view on the dollar.”
The New Taiwan dollar also advanced by 0.1 percent to NT$29.009 against the US dollar, while the Indonesian rupiah gained 0.2 percent to 8,559.
Meanwhile, the South Korean won declined 1.1 percent to 1,079.63, posting its third week of losses. The Philippine peso also weakened 0.1 percent to 42.64. The Thai baht slipped 0.2 percent to 29.94 this week through Friday. The nation’s currency market was shut for holiday on Friday.